The current state of the global economy is shrouded in uncertainty, with the looming threat of tariffs casting a dark shadow over economic forecasts. Economists at JPMorgan have pegged the probability of a global recession at a staggering 60 per cent, citing the potential impact of aggressive trade policies on the US economy and the rest of the world. While there is still a slim 10 per cent chance of a ‘Goldilocks scenario’ where the US economy experiences balanced growth and on-target inflation, the overall outlook remains bleak.

The Federal Reserve’s latest projections, issued in March, already feel outdated in the rapidly changing economic landscape. With the introduction of new tariffs and trade restrictions, the outlook for the US economy is uncertain. The next set of Fed forecasts, due in June, will likely reflect these changes, but the slow pace of official forecasts leaves much to be desired.

In times of uncertainty, can market-based signals provide investors with a more immediate view of the global economy’s performance? Yield curves, a traditional recession indicator, are currently flashing warning signs as the US yield curve dips into negative territory. Government bond markets also offer insights, with yields remaining stubbornly high despite multiple interest rate cuts by central bankers globally.

Stock markets are also sending signals of economic slowdown, with the Dow Jones Transportation Average down by 17 per cent over the past six months. The rise in the gold price and fluctuations in the copper price further indicate investor concerns and economic uncertainty. While market signals can offer a more timely indicator than economic forecasts, they are not immune to the impact of tariff uncertainty.

Overall, the global economic outlook remains uncertain, with market signals providing valuable insights into the current state of affairs. As investors navigate through these turbulent times, staying informed and agile will be key to weathering the storm.